Office of the Chief Accountant

The staff has reviewed your letter of April 22, 2004 concerning Deloitte Touche Tohmatsu's ("DTT") sale by its member firms Deloitte SA and Deloitte Conseil SAS (together, "Deloitte"), DTT's member firms in France, of their consulting business which has operated under the name INEUM Conseil et Associes or INEUMconsulting since September 22, 2003 (referred to as "INEUM"), to the former consulting partners of INEUM (referred to as the "INEUM Partners"). In your letter, you detail key terms of the transaction and conditions that DTT, including entities that have been considered part of DTT under Rule 2-01(f)(2) of Regulation S-X, have complied or will comply with in connection with the completion of the transaction. Your letter concludes that, based on its compliance with those terms and conditions, DTT should not be considered to have a "mutual or conflicting interest" or a "direct or material indirect business relationship" with, or a "direct financial interest or material indirect financial interest" in, any of its audit clients that are also clients of or enter into business relationships with or invest in INEUM, or that are invested in by INEUM or any departing INEUM Partners or employees.

As you are aware, the Sarbanes-Oxley Act of 2002 (the "Act") expressly prohibits any registered public accounting firm, or any associated person or entity of that firm, from providing certain non-audit services to its audit clients that are "issuers" as defined in the Act. The representations set forth in your letter indicate that DTT has already taken the following steps to divest INEUM: (1) Deloitte has sold the majority of its interest in INEUM in a private transaction to the INEUM Partners and other investors for cash consideration. Deloitte and its partners will hold less than 20% of the outstanding INEUM shares, calculated on a diluted basis. These shares of INEUM held by Deloitte and its partners will be sold, or otherwise redeemed, within three years from the date of DTT's letter. (Prior to the Sarbanes-Oxley Act, when accounting firms requested the staff's views regarding separation transactions, the staff generally expected that any equity interest held by the firm or its partners would be sold or redeemed within five years from the closing of the transaction. Going forward, the staff generally would expect a firm requesting the staff's views to hold any equity interest for a period of three years or less from the closing date of a transaction. On a transition basis, the staff will not object to the holding period commencing at the date of DTT's letter in this particular case.); (2) DTT has no corporate governance, or management role in INEUM or direct or indirect financial ties with INEUM (other than Deloitte's temporary ownership of the aforementioned equity of INEUM and transition service arrangements); (3) INEUM does not and will not, beyond a three year period as set forth in DTT's letter, use the DTT names unless there is a clear indication that they are separate firms; (4) DTT does not and will not receive from INEUM any royalty, interest, dividend or other payments, and there is no revenue or profit sharing between DTT and INEUM; (5) DTT and INEUM are under no obligation to refer clients to one another and there will be no referral fees or other forms of compensation to each other for referrals; (6) under the Non-Compete Agreement, DTT and INEUM have agreed to provide only certain services to each other's clients through September 22, 2008, and those services are and will be provided under separate engagements; (7) shared services between DTT and INEUM are limited and transitional in nature and are for a period of three years; and (8) INEUM has no obligation to DTT in connection with any retirement obligation and DTT has no obligation to INEUM Partners in connection with retirement benefits of former partners.

Assuming that the representations set forth in your letter are and continue to be accurate, and further assuming that DTT continues to comply with each of the terms and conditions set forth in your letter, the Office of the Chief Accountant ("OCA" or the "staff") will not recommend an enforcement action asserting that DTT lacks independence as a result of non-audit services provided to DTT's audit clients by INEUM or its employees. Of course, DTT otherwise remains fully subject to the Commission's independence requirements, as well as the provisions of the Act, with respect to matters not expressly covered by your letter and this response. OCA has taken this position based on the specific facts and circumstances represented in your letter. DTT will consent to any review deemed necessary by the staff, or an appropriate independent party designated by the Commission or the staff (such as the Public Company Accounting Oversight Board) to ascertain compliance. If the divestiture is found not to have satisfied the terms and conditions represented to the staff or if any of the remaining terms or conditions in your letter are not met, the staff's position will be vitiated, and the staff may recommend an enforcement action. Further, OCA has taken this position based on its evaluation of the relevant policy considerations and does not thereby adopt or endorse the analysis or conclusions set forth in your letter. This response expresses OCA's position only on these particular facts and circumstances and does not purport to express any legal conclusions on this or any other matter.

Sincerely,

Andrew D. Bailey, Jr.
Deputy Chief Accountant

Incoming Letter:

We hereby request that the Staff of the Office of the Chief Accountant (the "Staff") of the Securities and Exchange Commission (the "Commission" or "SEC") advise that, based upon and subject to the matters referred to herein, it will not recommend that the Commission take enforcement action against Deloitte Touche Tohmatsu, a Swiss Verein ("DTT"), or its member firms, or its or their respective subsidiaries or any other firms conducting audit activities for SEC registrants under the name "Deloitte Touche Tohmatsu," "Deloitte Touche," "Tohmatsu" and other combinations or derivations thereof or otherwise as part of the Deloitte Touche Tohmatsu network of firms or "accounting firm"1 (collectively, for the purposes of this letter only, "DTT"),2 asserting that DTT is not "independent" based upon the attribution to DTT of the consulting activities of the former consulting business of Deloitte SA and Deloitte Conseil SAS (together, "Deloitte"), DTT's member firms in France, which consulting business has operated under the name INEUM Conseil et Associes or INEUMconsulting since September 22, 2003 (referred to in this letter as "INEUM"). INEUM was sold by Deloitte to the former consulting partners (the "INEUM Partners") and other investors in a private transaction that was consummated on September 22, 2003.

We believe that as a result of the aforementioned transaction, that DTT and INEUM are already substantially separate organizations. Under these circumstances, we believe the terms of this separation transaction for Ineum, including the conditions proposed herein, serve as a basis for the staff to grant the relief requested.

Legal Analysis

The federal securities laws require that financial statements filed with the Commission by public companies, investment companies, broker-dealers, public utilities, investment advisers and others be certified (audited) by independent public accountants.3 The Commission has adopted Rule 2-01 of Regulation S-X regarding independence of accountants. The general standard set forth in Rule 2-01(b) provides that:

The Commission will not recognize an accountant as independent, with respect to an audit client, if the accountant is not, or a reasonable investor with knowledge of all relevant facts and circumstances would conclude that the accountant is not, capable of exercising objective and impartial judgment on all issues encompassed within the accountant's engagement.4

Rule 2-01(b) further provides that:

In determining whether an accountant is independent, the Commission will consider all relevant circumstances, including all relationships between the accountant and the audit client, and not just those relating to reports filed with the Commission.

The preliminary note to Rule 2-01 states that, in considering the standard set forth in Rule 2-01(b), the Commission looks to, among other criteria, whether the relationship or the provision of service "creates a mutual or conflicting interest between the accountant and the audit client."5 Rule 2-01(c) applies the standards set forth in Rule 2-01(b) to particular circumstances that are considered to impair an accountant's independence.6 For example, Rule 2-01(c)(1) provides that an accountant will not be considered independent if "the accountant has a direct financial interest or a material indirect financial interest in the accountant's audit client . . . ." In addition, Rule 2 01(c)(3) provides that:

An accountant is not independent if, at any point during the audit and professional engagement period, the accounting firm or any covered person in the firm has any direct or material indirect business relationship with an audit client, or with persons associated with the audit client in a decision-making capacity, such as the audit client's officers, directors or substantial stockholders.

For purposes of Rule 2-01, "accounting firm" means "an organization . . . that is engaged in the practice of public accounting . . . and all of that organization's departments, divisions, parents, subsidiaries, and associated entities, including those located outside the United States." 17 C.F.R. 210.2-01(f)(2) (emphasis added). Although not expressly defined by rule, the Commission has stated that it intends the phrase "associated entity" to:

reflect our staff's current practice of addressing these questions in light of all relevant facts and circumstances, looking to the factors identified in our staff's previous guidance on this subject. While the rules we adopt do not provide accounting firms with the certainty of our proposed rule, we are convinced that a more flexible approach is warranted as the types and nature of accounting firms' business arrangements continue to develop

Revision of the Commission's Auditor Independence Requirements, 65 Fed. Reg. 76008, 76059 (footnote omitted). As part of this guidance, the Commission also cited numerous prior no-action letters that had been issued to address the separation of consulting businesses from accounting firms. Id. at 76059, n.491 (citing various no-action letters). In the prior no-action letters, the staff has examined whether the firms are associated entities by considering such factors as whether 1) the accounting firm has any ownership interest in the consulting firm; 2) there are restrictions on the use of the accounting firm's name by the consulting firm; 3) the firms' corporate governance structures are separate; 4) there is any revenue sharing between the firms; 5) there are any joint marketing agreements between the firms; and 6) there will be any on-going shared services between the firms.

On July 30, 2002, the Sarbanes-Oxley Act of 2002 (''Sarbanes-Oxley Act'' or "the Act") was enacted. Title II of the Sarbanes-Oxley Act, entitled "Auditor Independence," required the Commission to adopt, by January 26, 2003, final rules under which certain non-audit services will be prohibited, conflict of interest standards will be strengthened, auditor partner rotation and second partner review requirements will be strengthened, and the relationship between the independent auditor and the audit committee will be clarified and enhanced. However, Congress left the definitions of "accounting firm" and "associated entity" untouched. In its final rulemaking to incorporate Title II of the Sarbanes-Oxley Act into the SEC's rules and regulations, the SEC also did not amend or modify its definitions of "accounting firm" or "associated entity." See 68 Fed. Reg. 6006 (February 5, 2003). Consequently, Rule 2-01 continues to direct firms to refer to the staff's practice of addressing these questions in light of all relevant facts and circumstances, looking to the factors identified in the staff's previous guidance on this subject.

The Commission's interpretations of Rule 2-01 are also collected in Section 600 of the Codification of Financial Reporting Policies (the "Codification"), entitled "Matters Relating to Independent Accountants."7 Section 602.02.e of the Codification addresses business relationships, such as joint ventures, limited partnership agreements, and investments, that may impair an auditor's independence. That section provides, in part, that:

Direct and material indirect business relationships . . . with a client . . . will adversely affect the accountant's independence with respect to that client. Such a mutuality or identity of interests with the client would cause the accountant to lose the appearance of objectivity and impartiality in the performance of his audit because the advancement of his interest would, to some extent, be dependent upon the client.

DTT desires to obtain assurance that, following the transaction described below, INEUM would not be considered an associated entity of DTT, such that to the extent that INEUM, or any partner or employee of INEUM provides services for, enters into business relationships with, or invests in or accepts investments from, DTT audit clients, DTT's independence will not be deemed impaired pursuant to Rule 2-018 or rules that are promulgated thereunder or any other provisions of the Commission's independence rules.

DTT believes that under the conditions detailed in this letter, that INEUM would not be considered an associated entity of DTT under the terms and conditions governing this Transaction (as defined below), and that DTT would not have a "mutuality of interest" or a "direct or material indirect business relationship" with, or a "direct financial interest or material indirect financial interest" in any of its audit clients as a result of the activities of INEUM, its partners and employees (which activities include, without limitation, providing services to, entering into business relationships with and making or receiving investments in or from third parties). This conclusion is based on the representations and conditions detailed in this letter, which, among other things: 1) explicitly limit at the outset, and within three years end, any retained equity interest in INEUM by Deloitte or any other entity included in the definition of DTT; 2) impose limitations on the use of the DTT names by INEUM; 3) require a strict separation of the corporate governance, management, and financial structures and interests between all entities included in the definition of DTT and INEUM; 4) prohibit any revenue or profit sharing between any entity included in the definition of DTT and INEUM; 5) prohibit any joint marketing between DTT and INEUM; and 6) limit any services between DTT and INEUM to those that are transitional in nature.

Factual Background

In August 2003, Deloitte initiated the sale of its consulting business in France by first transferring its interest in the consulting business to a newly organized entity, INEUM. Pursuant to the terms of a Transaction Agreement (the "Transaction Agreement"), and other agreements specified therein (the "Ancillary Agreements" and, together with the Transaction Agreement, the "Agreements"), Deloitte then sold the majority of its interest in INEUM in a private transaction to the INEUM Partners and other investors for cash consideration. Upon completion of the transaction, Deloitte and its partners held less than 20% of the outstanding INEUM shares, calculated on a diluted basis.9 In addition, neither INEUM nor the other investors involved in the Transaction owns any equity interest in Deloitte or DTT.

The above described restructuring, equity share sales, and Agreements, together with the Conditions to No-Action Confirmation listed below are referred to collectively as the "Transaction."

Other key terms of the Transaction are:

INEUM and Deloitte have entered into a Non-Competition Agreement, which prohibits Deloitte from competing against INEUM for certain services for a period of five (5) years. DTT will effectively be bound by the Non-Competition Agreement.10

Since the completion of the Transaction, there has been, and there will continue to be, no corporate governance, management or direct or indirect financial ties between any entity included in the definition of DTT and INEUM (other than payments relating to the Transaction, Deloitte's ownership of the aforementioned equity of INEUM and the transition services arrangement described below).

The equity shares of INEUM held by Deloitte and its partners as a result of the Transaction represent less than 20% of INEUM's equity on a diluted basis, and in all subsequent periods, will continue to represent less than 20% of INEUM's equity on a diluted basis.

Conditions to No-Action Confirmation

DTT requests that, subject to compliance with the following conditions, the Staff not recommend enforcement action to the Commission based upon the attribution to DTT of the activities of INEUM since the completion of the Transaction:

The equity shares of INEUM held by Deloitte and its partners will be sold, or redeemed, within three years from the date of this letter. Deloitte and its partners owned less than 20% of INEUM's equity on a diluted basis immediately following completion of the Transaction, and will own less than 20% during subsequent periods. The calculation of the percentage of INEUM's equity owned by Deloitte and its partners will be based on the percentage of outstanding INEUM equity owned by Deloitte and its partners, and pension funds for active partners at that time, and DTT. Equity owned by INEUM partners, by former principals, and by retired Deloitte partners with no continuing role or financial interest (other than through a self-directed or fully-funded retirement plan) will not be deemed to be owned by Deloitte for purposes of this condition.

As part of the restructuring process and sale, the consulting business has been renamed INEUM, and INEUM will only use the "Deloitte" and/or "DTT" names in limited circumstances during a transition period. Specifically, INEUM will be entitled to use a variant of the "Deloitte" name (e.g., "Deloitte Consulting"), including in conjunction with its rebranding to INEUM (e.g., "INEUMconsulting, formerly Deloitte Consulting") for a short transitional period, but in no event to exceed the three year time period set forth in the prior letters, as long as:

All publications, letterhead and stationery, name plates, office signage, business cards and similar materials that use the "Deloitte" name clearly designate that INEUM is not owned by DTT (e.g., "an independent consulting firm");

DTT does not represent in any publication, advertisement, press release, name plates, office signage, business cards or other similar material that it is the same firm, or controls, manages, governs or is affiliated with INEUM, or any affiliate, subsidiary or division of INEUM; and

INEUM does not represent in any publication, advertisement, press release, name plates, office signage, business cards or other similar material that it is the same firm, or controls, manages, governs or is affiliated with DTT, or any affiliate, subsidiary or division of DTT.

Deloitte and INEUM have maintained, and will maintain, separate corporate governance, management, and financial structures and interests including: separate boards of directors (including no contractual right of Deloitte or DTT to representation on the board of directors or governing body of INEUM), executives, employees, capital, credit lines or facilities, client bases, governing documents, operating policies, financial operations and financial and accounting policies. Deloitte and INEUM do not and will not exert financial or other influence over the other party's corporate governance, management, and financial structures or interests (except that Deloitte has limited protective rights with respect to the sale of INEUM to certain accounting firms).

Deloitte does not and will not (other than with respect to services specified in the last sentence of this paragraph 4) accrue, pay to or receive from INEUM any royalty, interest, dividend or other payment, whether or not tied to the performance of INEUM. Accordingly, Deloitte and INEUM will not share profits or revenues from consulting or any other engagements or agreements. After the Transaction and prior to the date that INEUM and Deloitte cease to occupy shared lease space (as described in paragraph 7 below), Deloitte and INEUM have not entered into any prime/subcontractor relationship to provide professional services to the same client, except that existing prime/subcontractor relationships may be completed in accordance with their existing terms; however, in no event will Deloitte be able to provide prohibited services under these relationships beyond May 6, 2004 and all other relationships will not extend beyond 18 months following issuance of the SEC's no-action letter.

Deloitte and INEUM may, but are under no obligation to, refer clients to one another. Deloitte does not and will not designate INEUM as a preferred provider of services, and Deloitte and INEUM do not and may not pay referral fees or other compensation to each other for referrals to each other nor to any subsidiary, affiliate, employee or agent of the other. Deloitte and INEUM have not and may not enter into any co- or joint-marketing, advertising or similar agreements or arrangements with the other that are inconsistent with this paragraph 5 or paragraphs 2 or 4 or that do not clearly state that Deloitte and INEUM are separate firms.

Subject to the Non-Competition Agreement referred to in paragraph 9 below, Deloitte may continue to provide services to clients of INEUM under separate engagements with such clients, and INEUM may continue to provide services to clients of Deloitte under separate engagements between INEUM and such clients.

Deloitte and INEUM have entered into transition services agreements (collectively, the "TSAs") for certain infrastructure and information services, operations services and other services as specified in the TSAs. Deloitte and INEUM will also grant each other limited, royalty-free licenses to use certain intellectual property to facilitate the provision of transition services. Neither Deloitte nor INEUM will make a profit on services provided to the other under the TSAs. The services provided under the TSAs will be provided for varying terms for up to three years, except for "Knowledge Sharing." Services identified under the TSA for Knowledge Sharing will be provided in accordance with the TSA so long as (i) INEUM is physically separate from Deloitte's other businesses and (ii) charges for such use are determined at arm's length (defined as cost, the basis historically used by Deloitte to allocate expenses to the former consulting business that is now INEUM) and appropriate provision is made so that confidential information is not communicated between Deloitte and INEUM. Deloitte also may receive certain transition services from INEUM for limited transition periods following the effective date of the Transaction. Each of Deloitte and INEUM also may purchase the other's services for its own account in exchange for customary arm's length compensation.

In certain cases, Deloitte and INEUM have entered into sublease or license arrangements for office space that is currently shared with Deloitte. Under these arrangements, INEUM will pay its proportionate share of the cost of such space based on the total square footage of each facility used by or allocated to INEUM, under the terms of such subleases or licenses and, with respect to related services and capital costs, under the terms of the TSAs. The sublease or license arrangements for each space will not extend beyond the term of the lease held by Deloitte. With respect to new leases for office space, Deloitte and INEUM individually will enter directly into such leases with a landlord and will not enter into new subleases with each other for office space after the expiration of the leases currently held by Deloitte. Until such relocations are made, Deloitte and INEUM will have separate and distinct office signage and their offices will be clearly distinguishable from one another although they may share certain common facilities.

Deloitte will consent to any necessary reviews by the Staff or an appropriate independent party designated by the Commission or the Staff (such as the Public Company Accounting Oversight Board) to ascertain that Deloitte is complying with the conditions herein provided.

Deloitte and INEUM are bound by the Non-Competition Agreement that will extend for a period of five years from September 22, 2003, or until a sale of INEUM that satisfies certain criteria. Notwithstanding the previous sentence, Deloitte may, after expiration of the Non-Competition, provide services otherwise restricted under the Non-Competition Agreement, including providing such services to audit clients that file reports with the SEC to the extent permitted by the SEC independence requirements and professional standards at such time.

INEUM has, and will have, no obligations to Deloitte in connection with any retirement benefits to continuing or former partners or employees of Deloitte. Deloitte has, and will have, no obligations to INEUM in connection with any retirement benefits to continuing or former partners or employees of INEUM.

In accordance with the terms set forth in this letter, on the date that Deloitte and INEUM no longer share lease space, Deloitte and INEUM will be free to contract and enter into business relationships with one another as would any other independent entities.

Certain Confirmations

In connection with its request herein, each of DTT and INEUM, insofar as each item below relates to it, hereby confirms to the Staff that:

DTT (including those firms that have not consummated their separation transactions at the time of the Transaction) continues to be subject to the independence requirements of the securities laws and the SEC's independence rules and interpretations issued thereunder to the same extent as they were so subject prior to the closing date of the Transaction.

DTT agrees to the above conditions and has furnished a copy of this letter (and will forward any no-action letter on this subject) to INEUM. INEUM will expressly acknowledge that it has been furnished a copy of this letter. DTT further represents to the Staff that it is not aware of any provisions of the agreements described herein or any agreement or instrument referred to therein that is inconsistent with this request.

DTT has furnished the Staff with a copy of the final versions of the Agreements (including without limitation the schedules, exhibits and annexes thereto) and hereby represents to the Staff that the final executed versions of such documents do not differ in any respect material to the matters referred to in this letter from the versions so furnished.

Confirmation Requested

Based upon the representations contained herein and in the materials provided herewith, and subject to continued compliance with the foregoing conditions, we hereby request that the Staff advise that the Office of the Chief Accountant will not assert or recommend enforcement action that asserts that DTT's independence has been impaired to the extent INEUM or any of its partners or employees provides services for, enters into business relationships with, or invests in or accepts investments from, DTT audit clients. We fully understand that if the Staff takes a no-action position, that position will be based on the representations and undertakings set forth in this letter and continued compliance with the material terms of the related executory contracts. We further understand that failure to comply with any of these conditions would invalidate the relief granted by the Staff in response to this request as of the date the Staff's relief was communicated to DTT.

Certain matters described above have not yet been publicly announced. Accordingly, pursuant to 17 C.F.R. § 200.81(b), we hereby request confidential treatment of the contents of our communications with the Staff with respect to all issues relating to this letter (the "Confidential Material") until a date 120 days after release of your response to us, or such earlier date as the Staff is advised by us that all of the information contained in the Confidential Material has been made public. However, when the Staff determines to grant the no-action relief requested herein, we understand and agree that the letter itself and the text of your response to the letter may be made public immediately. In addition to this request for confidential treatment, we will request, under separate cover, confidential treatment for the transaction documentation and the other materials furnished to you in connection with this letter pursuant to the provisions of 17 C.F.R. § 200.83.

* * *

If for any reason you do not concur with the views expressed in this letter, we respectfully request an opportunity to discuss this matter with the Staff prior to any written response to our letter. If you have any questions or need any additional information concerning the foregoing, please do not hesitate to call Scott Bayless at 202-879-5315, or Douglas Cox of Gibson, Dunn & Crutcher LLP at (202) 887-3531.

4 17 C.F.R. § 210.2-01(b) (2001). Under Rule 2-01, the term "accountant" includes "any accounting firm with which the certified public accountant or public accountant is affiliated." Id. § 210.2-01(f).

9 The calculation of the percentage of INEUM equity owned by Deloitte at any particular time will be based on the percentage of outstanding equity interests owned by Deloitte and/or its partners, employees, and pension funds for active partners at that time, and/or DTT.

10 The Non-Competition Agreement enumerates the businesses and services that are subject thereto. Subject to the terms and conditions of the Non-Competition Agreement, DTT may still operate its Deloitte Consulting and its Management Solutions business and other businesses that may provide similar services in certain limited circumstances to those provided by INEUM, consistent with the Commission's auditor independence rules.